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December 1, 2023

Cannabis CFO: Offering Virtual CFO Services to Cannabis Businesses

Are you curious about the ins and outs of the cannabis industry and how your firm can offer services? In this podcast episode from the Summit Virtual CFO by Anders Modern CPA Success Show, Tom Wadelton and Jody Grunden interview one of their own, Guillermo Rodriguez, Virtual CFO and Cannabis Industry leader for Summit Virtual CFO by Anders. Together, they take a deep dive into the world of cannabis. From the unique challenges faced by the industry to the importance of vertical integration, Guillermo shares valuable insights that can be applied to any niche and why he chose the cannabis industry to focus on and offer Virtual CFO Services.

“The cannabis industry is really pushing forward to help people have their own freedom to choose their path to well-being through non-conventional medicine. I decided I really wanted to be a part of that.”

Guillermo Rodriguez 

Check out the full transcript of the episode below.

Intro (00:00:00) – Welcome to the Modern CPA Success Show, the podcast dedicated to helping accounting firms stay ahead of the curve. Our mission is to provide you with the latest and greatest insights on cutting edge tools, innovative marketing strategies, virtual CFO, and alternative billing methods. Join us as we change the way people think about accounting.

Tom (00:00:22) – Hey, we are bringing you a really solid podcast episode today, so we are talking to Guillermo Rodriguez, Virtual cannabis CFO and cannabis niche leader, and you are going to get some education on what’s unique about that industry and that’s really his niche focus for those not particularly interested, I guess I would just say this is going to be an episode that is good for everybody. So, elements of a niche, what is important to a niche, regardless of what it is, how do you break it down? What are some of the really key, important things to understand? Having a passion for it, the metrics. So, if you’re thinking maybe it’s not cannabis for you, think about it from a niche perspective and what is it that he knows and could you say those same things about your own niche?

Tom (00:01:07) – We’re going to have some discussion about what that’s like. And then finally, we’re talking to one of our own team members. And so we think that’s an exciting thing to bring to you. So, I really hope that you’ll enjoy this episode with Guillermo Rodriguez. Welcome to our episode of the Modern CPA Success Show. I’m excited today to have one of our own team members in here, Guillermo Rodriguez. And we are going to talk about the cannabis industry. I am joined by my co-host, Jody Grunden. Jody was a founder of Summit Group, now works with Summit Virtual CFO by Anders. Jody, welcome.

Jody (00:01:38) – Yeah, thanks, Tom.

Tom (00:01:39) – And now on to Guillermo. Guillermo, I’d like you to tell us a little more about yourself, a bit of your background as a CPA, financial planning, and analysis professional. You also founded your own firm called High Point, and it offered virtual services before you joined us here. Guillermo, welcome to today’s show.

Guillermo (00:01:57) – Thanks, Tom. Yeah, yeah, Just a little bit about myself. I’m right about 20 years in my professional career.

Guillermo (00:02:04) – And like most CPAs, I think I had the opportunity to go into industry or public accounting when I graduated college and I decided to go into industry and got my CPA. And I was pretty fortunate in the sense that when I went into corporate, I was working for a company that liked to move people around. And so, I started my career in internal audit and then moved into a financial accounting manager role and then eventually worked in corporate finance. And so, I got to move around and learn different parts of the business, risk management, all the kinds of functional departments. And so, I did that for a few years. I think the transition in my career that kind of led me to what I’m doing today as a virtual CFO is right after when I was working in financial accounting, I had an opportunity to go into corporate finance. We were making a large acquisition at the time, and we needed someone to do the financial modeling for the acquisition and how that was going to integrate into the business.

Guillermo (00:03:13) – And we needed that to get the deal approved by our banks. We had a large credit facility with 12 banks and they had to approve any acquisition over $50 million. And so we developed the model and that was really my kind of my segue into being more of a forward looking accountant into forecasting. And I was also doing the diligence and working through the company that we’re acquiring and looking through their projections and trying to verify everything and that kind of thing. So from that point forward, you know, I would go to meetings with bankers and dinners and things and I was always introduced as this is our modeler, our model. And, you know, they would always joke, well, who do you model for? And I would always say, you know, or something like that. And that joke went on for like several years. And so I ran it into the ground.

Jody (00:04:04) – So, so, so why why cannabis? I mean, sounds like big corporate world here.

Jody (00:04:10) – And then you switched gears. Looks like 180 degrees. And now cannabis, why cannabis?

Guillermo (00:04:16) – Yeah, that’s right. So I stayed in in corporate for, for a few more years. I was starting to have thoughts of like, I was always like, well, what’s next? You know, if you look back every 2 to 3 years, I would do something different. And right around the pandemic year. Like most of us, things were shuffling around. And I looked at that year as a bit of a blank slate. And that’s the year I decided to go into consulting. And a lot of that had to do with kind of some of the things that I went through in that year. I was dealing with a lot of restrictions with the company I was working for in terms of mandates and restriction of movement and different things that I just felt like these are not the things they’re going to help our health and help us through this pandemic. And so, I was having some different thoughts as to how I wanted to handle my own health and my response to the pandemic.

Guillermo (00:05:12) – And I felt very limited. And so here is the cannabis industry that I felt was an industry that’s really pushing forward to helping people have their own freedom to choose their path to well-being, to choose non-conventional medicine. And so, I just decided I really wanted to be a part of that. I did a bit of research and like, what are the nuances in this industry? And there’s courses out there to learn how the cost accounting works in the cannabis industry. And I came from a cost accounting background in construction and engineering. And so, then I, I did a about a year of consulting, working on different projects, large companies. And then I decided to go ahead and go all in on cannabis and doing the self-employed route. And as Jody knows that’s a, that’s a big leap and going out and just doing the marketing, doing the selling, and all the moving parts that go into self-employment. And so that was a tough route.

Guillermo (00:06:17) – And as I was getting into it, I was looking for a bridge and saying like, how can I do this much, much quicker? And uh, not to brag, but I was like, who’s the best that’s doing this and has been doing this very successfully and it’s been very progressive of it. And marketing works because I learned about the firm through your podcast, Tom, and all the great things you all are talking about. And it was very educational for me because as I was trying to learn how to best serve clients, I was like, How do I scope this work? How do I price and package this work? And I was having a really hard time through that, like trying to work and especially packaging the services and selling them. And so, you know, we’re doing such a great job with that. I wanted to learn from that. And so, then I had my initial conversations with Jody, and a couple of months later I joined the firm.

Guillermo (00:07:13) – And now leading up the effort in the cannabis vertical.

Tom (00:07:17) – We’re excited that you did. I am curious at the beginning, so when you start talking about cannabis, what percentage of the time does it quickly turn into some joke about pot and cannabis? Is that pretty early on that someone’s like laughing about, Oh really?

Guillermo (00:07:31) – The puns are endless. You know, you could form a joint venture between two companies and, and it starts.

Tom (00:07:40) – I remember during the retreat where you rattled off about ten in a row little puns when you were doing the readout from your group.

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Tom (00:08:29) – Okay, so for the cannabis industry, which is your area of focus, can you break down a little bit the kind of companies you help for someone who doesn’t really understand the industry and may have in their mind what it looks like. What kind of companies are there in the cannabis industry?

Guillermo (00:08:43) – Sure, sure. So so basically, I mean, think of supply chain in a consumer packaged good industry. The industry is not quite there yet. If you look at cannabis sales, I mean, half are branded. The other half are brands that are recognizable within the state. But what’s unique about it is that you can’t market a brand outside of your state. And so there hasn’t been this national presence of any particular brand. So that’s the opportunity in the future. You know, someday when we have interstate commerce and the industry, you’ll see kind of the first brands come out and you’ll be able to really recognize, oh, this is this is the cannabis brand, this is what I purchased.

Guillermo (00:09:25) – And it’ll be more well known. So we’re not quite there yet. But let’s say you’re looking into investing in a cannabis company. You want to get licensed in a particular state and get moving. There’s three parts in the supply chain, which is really the very beginning, the cultivation, the manufacturing of the product, the distribution. And then at the end is the retail. So I think dispensaries and the retail side of the business and as I mentioned, within retail, some operators may choose to vertically integrate, and they manufacture and develop their own brand and carry that within their stores or sell to other dispensaries or a combination. And the same with cultivation. You know, when we decide to go into cultivation, there’s the risk of wholesale prices because some of that product will go into your own, down your own supply chain, into your retail stores. But some of it will have to be sold to other stores as well. So, there’s all those things to consider when vertically integrating.

Guillermo (00:10:33) – But those are really the three parts. And I don’t want to keep talking too long, but there are some states every state has their own market, right? It’s that state level and some states require vertical integration. So when you go and apply for a license, you’ll have to be a cultivator manufacturer and a dispensary like in Hawaii. And so you really only carry your own brand. You may be able to have all different kinds. You will have all different types of products and SKUs in your stores, but it’s all the same brand and where you have some. States that don’t allow vertical integration for the most part. Most states will allow in the licensing to do a combination of all three.

Jody (00:11:18) – Okay. How do you keep up with all the regulations and stuff? It sounds like there’s a ton of them in the industry right now.

Guillermo (00:11:44) – I think when you’re really passionate about the industry, constantly learning, constantly reading, joining the various trade groups, and that’s the best way to keep up with it is to just really be interested in it. And then there’s services and channels out there like BSA. It’s probably the most authoritative source out there in terms of data and what’s selling basket analytics, and those kind of things. But, you know, we’ve joined the National Cannabis Industry Association to advocate for policy that will help the industry. And so, joining some of those organizations and staying in touch with folks that are in the industry is the best way to stay on top of it. But yeah, this is, it’s fun. I learn something new every day. You know, every time you’re talking to someone, you’ll learn something about a different state and how things are working there.

Tom (00:12:39) – So as we like to focus so much on niches or we really encourage people to build in on niches. I’m curious, some of the things that make the cannabis niche different, and I think regulatory must be one of them.

Tom (00:12:50) – The legalization per state and not for federal banking is another. Am I right? Some of the banks don’t really want to have anything to do with cannabis companies. Is that right? 

Guillermo (00:13:02) – Yes, so from a federal standpoint, cannabis is still a schedule one controlled substance. And so there’s been you may have seen in the news that Biden approved to the research study to try to schedule cannabis, but because of that, any bank that has a national charter with the federal government, it’s not going to risk their standing to bank a cannabis company because it’s still federally illegal. Same thing with Mastercard and Visa. So those transactions can’t run on those rails. And so there’s very few industries that have these kind of hurdles that, you know, go into a store and think about how credit card drives higher sales, you know, credit card transactions. You know, that’s somewhat limited. Now, there are other solutions out there, debit card providers that, you know, you can still use plastic in a store and that kind of thing, but it’s still very limited and the cost still falls on the consumer.

Guillermo (00:14:08) – And so it drives higher retail prices, the excise taxes, the credit card fees, the debit card fees and all that kind of thing. But with all that being said, Tom, to your question, there’s local and state banks that have come out and they do bank, they bank cannabis, but it’s all at a higher cost. So, it’s just one more example of higher cost for the industry. And I think this is maybe the seventh year that safe banking has been introduced that would allow banks to bank a cannabis companies. My guess is it’s not going to happen again this year. That’s just my guess. I think it’ll happen within the next few years. And federal legalization again, my opinion. But again, a lot of the folks that track the policy say that it’s going to take a long a good while before it’s safe.

Tom (00:15:03) – Safe banking would, even with schedule one, at least allow the banks to have some kind of safe harbor if they work with cannabis companies.

Guillermo (00:15:10) – That’s right. Okay. And it would lower the cost and and increase help, you know, with the biggest problem in the industry, which is capital.

Tom (00:15:18) – Okay.

Tom (00:15:19) – I could see the value it would bring when you’re coming into a company and saying, let me just help you get money in and then would assume a lot around the controls because that must mean that the stores are dealing with a lot of cash. And so if you’re helping people understand how to put controls around cash so you’re not getting robbed or money taken by employees and things like that, I could see a CFO coming in and saying, I’ve got a lot of advice for you. Yeah.

Jody (00:15:42) – Can you go into that a little bit more, Guillermo, on how a CFO can help. Tom mentioned on a couple of good points there. What are some other things that CFOs can help with and then the different verticals within the cannabis industry, there’s more than one, obviously. So how would that work?

Guillermo (00:16:00) – So back to kind of Tom’s question as well, like what is unique within cannabis? And that is that there’s very high startup costs, everything from the licensing to securing the land and then finding your investors, attracting investors to get started.

Guillermo (00:16:24) – And then the industry is going through this, as you can imagine, as the first kind of states came on Colorado, Oregon, then eventually California. I think the industry’s maybe ten years in by now or more. There’s a lot of excitement, so a lot of capital pouring into the industry. And so there wasn’t as much sophistication needed to raise that capital and investors weren’t as diligent about what they’re investing in based more off excitement. Think of like the stock market and how that works. In the tech industry, when PE ratios were out the roof, same thing happened in cannabis with Canadian publicly traded stocks. And so all that to say, I think the industry had really good years through Covid. So that really helped because a lot more disposable income, everything was shut down except dispensaries, and people were spending a lot. And so those are some good years. And now things are leveling out. Investors are exiting or waiting until things get better from a regulatory standpoint.

Guillermo (00:17:35) – And so companies are really needing that guidance to help raise capital by way of talking to investors, by demonstrating strong metrics over time and being able to tell the story of how they’re going to get to profitability, to be able to tell investors like, hey, this is the path we’re going and this is how we’re going to deploy that capital and, you know, get the thumbs up and keep moving the business forward. And so I think that’s really the point where CFOs come in and at this time, you know, where the industry is to help to kind of level up the sophistication from an investor relations standpoint and being able to talk to folks about the story of the business and where they’re going, maybe why vertical integration is making sense, why it’s not because that’s another part of the growth, too, as companies decide to vertically integrate. It’s got to make sense. You know, the opportunities got to be there. You got to be able to tell that story to investors and keep them engaged, you know, month to month, quarter to quarter in that communication process.

Jody (00:18:43) – Well, what type of metrics do you actually look at with the cannabis industry.

Guillermo (00:18:50) – So I think again, going back to sales opportunities, especially when it used to sell itself, right? I mean, sales were out the wazoo and now that’s kind of leveled out. And the new part of the industry is understanding maybe the new consumers coming in. Like, I’m just going to make a guess. But like me, you and Tom, like if we were going to go out and go to a dispensary, like, what would we buy? Maybe we’re not as educated or we’re a different type of consumer. And so understanding the basket analytics of like, what to carry, what if your consumers are mainly tourists? Will you want to make sure that you carry products that tourists are more likely to buy like edibles or the different types of forms? And so the metrics are all around the basket analytics and what’s driving higher sales and what’s going to make a customer buy more.

Guillermo (00:19:56) – You know, it’s been proven that, you know, consumers that add edibles into their basket usually have a higher a basket order. And so like, you know, proving those things out in your store is really what’s going to help drive higher sales. And so the one of the non-financial drivers that we look at is foot traffic, you know, foot traffic and your store and then looking at what’s the average order per customer and how many times are customers buying per month, because that’s really what’s going to help those daily transactions. Those numbers of transactions are going to help forecast sales.

Jody (00:20:36) – And then that information is required to be kept by the store. Is that correct?

Guillermo (00:20:43) – That’s right, because the states have a tracking system in place through the metric, the software, the state run software. All that information is captured. And so that’s what’s unique also about cannabis is that you have to capture all your customers information. And so you get to really know how much they buy, what they buy, how many times they come into the store.

Guillermo (00:21:09) – And the same thing if you’re running an event, if you run in an event that’s a consumption event, usually that particular jurisdiction, state municipality, will require you to check people in and run them through the metric. And so you also capture great marketing information like their emails. And so all that, even though it’s a burden on the industry, it does help in some ways. And there’s great tools out there that sit on top of the point of sale system that leverage, you know, the thing that’s happening now with AI and things to help bud tenders. Those are the people at the front cross-selling to the customer coming in through the door to make sure they optimize that sale.

Jody (00:21:57) – Yeah. So, when we talk about profit focused accounting, we talk about cash production, you know, financial statements and, pipeline, or the four different main areas. And you and I, what we’re talking about right now are basically the production side. You know, how do we develop that forecast? And so, what you’re saying is the information’s already there for you to actually build that forecast for the client.

Jody (00:22:20) – And so it’s a kind of a requirement, I guess, for that. And you’re just taking that information and looking forward. Am I stating that correctly?

Guillermo (00:22:28) – Yeah, it’s one of those industries where the information is captured and it’s just a matter of what, what tools do you want to use to capture that information?

Tom (00:22:40) – Would you say it’s fair, Guillermo, that a lot of store owners probably look at that data as a necessary collection for state and maybe don’t understand initially the value or the information that they have there?

Guillermo (00:22:51) – Yeah, I, I have calls all the time, with providers like I’ll do a demo and just and it helps me learn but it also helps me learn like what what tools are out there, for our clients, and I asked those type of questions on like do you see most people actually leveraging this the full potential of these tools and a lot of times the answer’s no, especially for the small businesses. But what they always say is that the large MSOs, the multistate operators, you know, they’re doing 50 million in sales.

Guillermo (00:23:26) – They have more sophisticated management. They have departments. And they most definitely take advantage of it. But where our client base is in the 2 to 20 million, there’s a lot of room for improvement of optimizing the sales, as well as, through to the inventory management part of it, too.

Tom (00:23:46) – I bet I could see when you talked about like us going in a touristy city, if they had this data showing that a lot of people are not frequent purchasers where they say, okay, those are tourists. I think of myself and I’m not currently a cannabis user, but going to a place, I’d be kind of intimidated, like, do I walk in and suddenly feel like everyone needs to be a leader and you stand there not knowing what to do. So teaching someone that and saying, hey, do you want it to be a good experience? If someone walks in and they just want to try it to just sort of get a friendly environment. I think of how people are afraid to go to Starbucks because they don’t know the 23 adjectives to order.

Tom (00:24:21) – Yeah. Right. So how do you make it easy for someone walking in? Yeah.

Guillermo (00:24:25) – It’s very true. So it’s about that layout of the store feeling welcoming because that’s where the sales are going to come from is at least the next layer is the people who are just walking in and then you end up with a customer, you know, you end up with a customer. You know, I always use the example of there’s a little speakeasy down the street from where I live. And it opened many years back, probably one of the first here in the city. It’s pretty cool and it’s underground and all that kind of stuff. It’s got like a little red light. And the owner, we walked in one time, there was nobody there, but he started to kind of entertain us by teaching us about all the different kinds of gin and tequilas and all these different things and showing us different kind of drinks and got really expensive.

Guillermo (00:25:16) – Maybe that’s the point. And he educated us and then we learned. We felt good knowing. You feel good because you drink a Starbucks, you feel fancy, right? It’s the same thing with cannabis as kind of the branding starts to work. People feel associated with that brand and that experience, and they’re more likely to come back. And so all that to say the punchline of my story was that he then challenged us to drink an Irish car bomb, and he said, if we could drink it faster than him, he would give it to us for free. So we’re like, okay. And then sure enough, he beats everybody.

Tom (00:25:59) – So, he knew what was going to happen with that bet. Yeah, that’s right. Since you talked about the educated, could you tell us a little bit about sort of the plant and maybe a little bit of the science of cannabis? Because I’d love to learn a little bit more about sort of how this originated turned into medicine.

Guillermo (00:26:18) – Sure. Just the basics is so when we think of the plant, there’s two varieties, main varieties, sativa and indica. When you think of cannabis, one is known to have more euphoric effects versus the other ones that may be more relaxing type of effects. But within that there’s all types of hybrids and strains and, and so really when we’re talking about cannabis, we’re talking about the flower. It’s the female plant and it’s consumed in a variety of different ways. You know, the flowers dried and cured and, you know, rolled into a joint or they’re sometimes you can extract the manufacturing process extraction, you know, from the flower for edibles and all kinds of other different products. But essentially, this flower contains, at least from right now, there’s been over 100 different chemicals compounds discovered in the plant that are called cannabinoids. Right. The most popular one being THC, the one that gets you high and the other most abundant cannabinoid is CBD. So CBD oil, it’s a non-psychoactive component we use it for.

Guillermo (00:27:34) – You’re probably familiar with it. You know, use it in lotions. It helps with anti-inflammatory and all kinds of things. And so the research then discovered that we have an endocannabinoid system. Animals and humans have this endocannabinoid system. So, we have receptors that take in these cannabinoids, and we produce chemicals naturally. But these chemicals are very similar to the chemicals that our body produces. These are the chemicals that regulate our body, help us deal with stress and help with digestion and time, flammability, all these things help us feel better. And so for thousands of years, humans have been consuming this plant to get to help those effects, to help you feel better and more balanced. And so that’s really the history of the plant. But most people are familiar with the THC, the part of the plant that gets you high. But now we’re discovering how the different cannabinoids work together to improve your health. And now we’re able to separate those for the effects for certain desired effects within the body.

Guillermo (00:28:43) – So like I use one, it’s called THCV, it’s a little tincture. It helps with focus. And so some days I may use it, it’s a non-psychoactive. You know, they sell it in Texas. And, and so those are some of the kind of more specific things. But that’s what we’re finding is consumers are wanting consistency and very specific desired results from the medicines that they want.

Tom (00:29:11) – You know, kind of your version of caffeine, it sounds like, for the if you’re looking for focus, right. Where a lot of people smoke.

Tom (00:29:26) – So I’m curious with the interstate issues that banks deal with, if you’re a virtual CFO firm, are you dealing with some of the same kind of things that you have? You’re in Texas, right? So a Colorado company you’re doing virtual, does there appear to be any kind of legal issue of offering those kind of services?

Guillermo (00:29:42) – Yeah, so banks, so you’ll hear about like a plant touching in the different tiers.

Guillermo (00:29:47) – So banks will categorize service providers and companies into like first level. You know, they plant a plant touching company like a retailer or service provider or transportation company, and then they’ll determine their risk based on that. And so big banks like Bank of America and Chase and Wells are very sophisticated and all of this, and they can track you down if you’re dealing with a cannabis company. So you know, I don’t advise to deal with a federal or a big bank if you’re even a service provider. And I can tell you from personal experience, I was a bit naive and didn’t think it would affect anything. But I used Bank of America, as Jody mentioned, I was a self-employed proprietor before I joined Summit and sometime later my bank accounts got frozen and shut down. And it did cause a big disruption because it was my business accounts and my personal accounts with Bank of America and those got closed as well. Wow. And then I had brokerage accounts, and I didn’t know you could just close the brokerage accounts and liquidate all the securities.

Guillermo (00:30:58) – And that could happen, too. That’s crazy.

Tom (00:31:00) – Ouch.

Guillermo (00:31:01) – Yes. And so six accounts in a credit card all got shut down like overnight because. I was a service provider. And so you do have to be careful and make sure that you use a cannabis friendly bank, a bank that has explicitly said we bank cannabis and that that they know.

Tom (00:31:20) – Even as a service provider, right. Because you were not touching product retail or anything like that, you were providing service to those companies.

Guillermo (00:31:26) – That’s right. Okay.

Jody (00:31:28) – Yeah. That’s wild. That is super wild. What are the trends you see happening? I mean, obviously that hopefully goes away fairly quickly and gets resolved so that doesn’t happen because that’s just ridiculous. But what other issues do you see or hurdles do you see happening in the cannabis industry with service providers?

Guillermo (00:31:50) – I think that’s one of the biggest trends is that there’s been a resistance in cannabis to professional services and many operators came from the legacy market.

Guillermo (00:32:05) – And so that just means, you know, unlicensed operators, they came from a market that was, you know, $4,000 for a pound of flour. I mean, prices were very healthy. There wasn’t a need to have, you know, a sophisticated business. The product just did very well. And so, as we’re moving towards this period that I, you know, described earlier, there’s a bigger need for legal marketing, financial services, you know, virtual CFOs and guidance. And so, investors are demanding it. So, I think that is a big trend, is that the industry is starting to embrace professional services even at the levels of, you know, smaller companies. And I think that’s something that’s needed to help the industry survive because you look at an industry with a high, we haven’t even talked about that the high federal taxation rate banking, the high regulation, the high startup costs. It’s a miracle how the industry has survived this long and has done so well and has grown to almost 30 billion by the end of this year.

Guillermo (00:33:14) – And so that is a big trend. But the other trends just within the industry is, is the new consumers like we talked about earlier, is understanding these new consumers and new people who will begin to consume cannabis in the form of what we call the minor cannabinoids. These are the CBD, the THCV and some of these other ways. And so the quicker companies can start to understand these, you know, these opportunities and these consumers, the better they’ll do. And so some of these things are just being starting to be tested like beverages. You know, it’s a new thing. And so it’s trying to understand how consumers are going to purchase those kind of products. And so. Yeah. It’s a wild, wild, wild west.

Jody (00:34:02) – Yeah, kind of shifting from the vendor to the actual business, what are some of the pitfalls that you’ve seen? Somebody just, hey, I want to start a cannabis business and they jump right in and boom.

Guillermo (00:34:13) – There’s a lot of them, Jody and, you know, consuming cannabis is very relaxing.

Guillermo (00:34:21) – But operating a cannabis company is very, very stressful.

Jody (00:34:25) – It’s tough.

Guillermo (00:34:28) – It doesn’t go together. And there’s all kinds of pitfalls, understanding, really, that anything can happen and that there’s things that you don’t know from a regulatory standpoint how they’re going to play out. Like, for example, as an operator, you might think, okay, I’m going to go into a state and it’s a medical market and I’m going to build a business plan because they’re going to legalize recreational, use next year. And it’s very likely. And you’re building your plan based on that. And then you go into the next year and the ballot initiative fails, and it doesn’t move forward. And so, there’s those types of things that if you’re going to go into the industry, you have to be prepared for what could happen from a regulatory standpoint. In many cases, the industry moves backwards from a regulatory standpoint, and so sometimes things just get even tougher. Um, and you can’t assume that just because regulation or policy gets implemented that it’s going to happen overnight, like Minnesota right now is legalizing recreational use. Well, it’s not going to happen tomorrow.

Guillermo (00:35:43) – You know, it takes time for things to start moving forward and then many times when. When a state passes recreational use, you still have to go down to the municipality and how they’re going to deal with it. And so many times you’ll say you’ll get a cultivation license in a state and then you go, and you secure your land and then the state may come up with some silly thing like they don’t want you to use the groundwater, or you have to bring in your own groundwater or something like that. I say that because I’ve heard these stories, and these are like literally the kind of things that can happen. And so it’s like be prepared for all kinds of challenges that could come up. And I think it goes back to the point of being well capitalized and make sure, you know, develop those relationships with investors because it’s going to be, it’s a long road and don’t mean to it’s like it’s hard to be kind of doom and gloom. But the other side of it is that there’s so much opportunity for sales growth in the industry because there’s so much demand for this product and so much interest.

Guillermo (00:36:51) – And so that’s the other side of it.

Tom (00:36:55) – Sounds like someone going in and having good legal representation from someone who really knows the area to say, here’s how you throw all these roadblocks. Yeah.

Guillermo (00:37:07) – And I’ll give you a like an example. In Texas right now, like our legislature meets every two years, and we don’t go through a ballot initiative process like a lot of these states do when they legalize cannabis. So, we have to wait every two years for things to move forward. Um, and there was about some 30 something bills introduced into the house related to cannabis. A few made it to the Senate, nothing moved into committee and moved forward. So, there was no progress in Texas. But one of the bills would have allowed the State Department to take over the program and add pre-qualifying conditions to our medical program. And so, they took license applications and took something like 200 license applications.

Guillermo (00:37:57) – I added up the dollars. It was something like $4 million in fees, nothing moved forward. And so, all this money just goes away, you know, well, goes to the State Department. But those are the kinds of things that, you know, you invest, you apply for a license, nothing moves forward. So, there’s that risk.

Tom (00:38:15) – Yeah.

Jody (00:38:16) – Wow.

Tom (00:38:17) – Interesting. Hey, with just a couple minutes left, let me make a little bit of a shift. So you had your own VCFO company, and then joined Summit. We’ve got listeners, and we often advertise our course, the playbook for people who want to build their own. What’s been your experience of just big differences between your own show, which a lot of people think is really good versus joining a company that does it? What are some big learnings that people might think of if they’re kind of, if they feel like they’re on a path? Do I want to build my own? Do I want to join someone?

Guillermo (00:38:50) – Yeah.

Guillermo (00:38:50) – I think for me, the biggest thing has been as I started this is to figure out your own path. And your own unique path because I think that’s really going to inform and motivate you and forge your own unique path. And so, to me, it wasn’t so much about like, I got to do this thing this way, build, build the business. For me it’s like, where can I find bridges to do what I ultimately wanted to do? So, looking at that end goal, which was to deliver this service to clients and to help small business and like, how can I get there? So, I really looked at what are all the different paths and ways I could get there. And I didn’t close my mind into any one particular path. And so, I think that’s the biggest part of it, is to just stay open minded and think more about what’s the end goal and what you really want to do and how you want to, how you want to serve clients.

Guillermo (00:39:45) – And if that’s the motivation, helping others, I think you’ll get there. And from a, from a practical standpoint, I think what’s helped me most about the course and about being with Summit is how we’ve packaged the services and really made it flexible for clients to come in and get exactly what they need and what they’re looking for. And as a sole proprietor, that was the biggest challenge. It’s like, what do I do? What do I offer? How do I price it? How do I talk to people about it? Yeah. And I think we do that really well.

Jody (00:40:22) – Well, kind of piggybacking off of that, what advice would you give somebody out there that wants to start a virtual CFO practice in the cannabis industry?

Guillermo (00:40:33) – My advice is to start as early as you can, talking to folks about what you do and to start to find your own voice and to what? Like, what’s your message? Who do you want to serve? And really having that purpose behind it, because that’s really what’s going to motivate you every day because you need that motivation every day to keep going out there.

Guillermo (00:40:58) – As far as cannabis specific. My advice would be pursue it because you see the benefits of the industry because you love the industry, because just with VCFO services, but especially in cannabis, is you got to build trust with the industry, you got to build trust with your future clients. And so, if they can see that you’re out there trying to help this industry thrive. A lot of it is pushing forward, you know, the regulatory, the policy part of it, or finding some kind of way in your own unique way. I think building those bridges and those partnerships within the industry that you’re here for long term, I think really goes a long way. And so, I think that’s my advice is just be here for the long term in cannabis because think it’s going to be a long, long, long term thing, helping the industry move along.

Tom (00:41:51) – Jody I love that question. I love Guillermo’s answer in large part because if you think of kind of why would you go into almost any niche? I think you gave a great answer for someone saying, Hey, as I try to pick my niche, what is it? And think that will carry you much further than maybe a financial analysis that says, well, this is the niche that’s going to make me the most money but don’t care about it.

Tom (00:42:11) – My guess is you’re probably not going to be very good at it and you’re probably not going to enjoy it. But if you really have a strong why behind it and that’s really good.

Guillermo (00:42:19) – That’s right. Yeah.

Tom (00:42:21) – I think that answer is a good sort of ending point. Guillermo, thanks. This has been for me, personally, this has been really educational and just a really good understanding of a particular industry. But again, someone who says, well, maybe it’s not cannabis industry for me but their own niche, all these different things, how well could someone describe elements in the niche, the breakdown, the industry, their passion around that and think you’ve shown a good model for how you try to develop expertise in a particular niche.

Guillermo (00:42:49) – Well, thank you, Tom. I enjoyed the conversation.

Tom (00:42:53) – Thank you.

Jody (00:42:54) – Great.

Outro (00:42:56) – Enjoy this podcast. Visit our website SummitCPA.Net to get more tips and strategy for achieving modern CPA firm success. We are here to be a resource in this ever changing industry.

If you’re a cannabis business looking to improve profitability or scale your business, learn more about our cannabis virtual CFO services. You can also book a free consultation to learn more about our services below.

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